03/10/23 Briefing

The S&P 500 futures are down 20 points and are trading 0.5% below fair value. The Nasdaq 100 futures are down 82 points and are trading 0.6% above fair value. The Dow Jones Industrial Average futures are down 135 points and are trading 0.5% below fair value.

Stock futures indicate a lower open, pressured again by rising market rates. The 10-yr note yield is up another six basis points to 4.73% and the 2-yr note yield is up three basis points to 5.12%. Yesterday's disappointing price action, as evidenced by a 1.1% decline in the Invesco S&P 500 Equal Weight ETF (RSP), has also contributed to the negative bias this morning.

The Reserve Bank of Australia left its cash rate at 4.10%, as expected, and Cleveland Fed President Mester (non-FOMC voter) said one more rate hike this year may be needed, according to Bloomberg.

In other news, Rep. Matt Gaetz (R-FL) filed a motion to remove House Speaker Kevin McCarthy as punishment for working with Democrats to fund the government, according to The New York Times. 

In corporate news:

• Meta Platforms (META 306.00, -0.82, -0.3%): considers charging $14/month in the European Union for Instagram without advertising, according to the WSJ

• Ford (F 12.25, -0.06, -0.5%) and General Motors (GM 32.32, -0.15, -0.5%): to eliminate 500 factory jobs, according to the WSJ

• Warner Music Group (WMG 32.18, +1.09, +3.5%): upgraded to Buy from Neutral at UBS

• Warby Parker (WRBY 13.79, +0.52, +3.9%): upgraded to Outperform from In-Line at Evercore ISI

• HP Inc. (HPQ 26.32, +0.65, +2.5%): 10% owner Warren Buffett sold another 5125638shares worth more than $132 mln

• McCormick (MKC 72.50, -2.22, -3.0%): reports EPS in-line, revs in-line; raises FY23 EPS in-line, reaffirms FY23 revs guidance

• POINT Biopharma (PNT 12.33, +5.64, +84.4%): to be acquired by Eli Lilly (LLY) for $12.50 per share

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Tuesday on a lower note while markets in China and South Korea remained closed for holidays. Japan's Nikkei: -1.6%, Hong Kong's Hang Seng: -2.7%, China's Shanghai Composite: CLOSED, India's Sensex: -0.5%, South Korea's Kospi: CLOSED, Australia's ASX All Ordinaries: -1.3%.

• In economic data:

• India's September Manufacturing PMI 57.5 (expected 58.1; last 58.6)

• Australia's August Building Approvals 7.0% m/m (expected 2.5%; last -7.4%); -6.7% yr/yr (expected -6.4%; last -7.0%). August Home Loans 2.6% m/m (expected 0.0%; last -1.9%) and Private House Approvals 5.8% m/m (last 0.4%). September Commodity Prices -22.0% yr/yr (last -22.9%)

• New Zealand's Q3 NZIER Business Confidence -52% (last -63%) and Q3 QSBO Capacity Utilization 87.3% (last 81.7%)

• In news:

• Japan's Nikkei fell to its lowest level since early June while Hong Kong's Hang Seng was pressured to a level not seen since late November.

• Property stocks remained weak in Hong Kong even though Evergrande rallied after its trading halt was lifted amid news that the company's founder and chairman is in police custody.

• The Reserve Bank of Australia left its cash rate at 4.10%, as expected.

• Major European indices trade in the red while the U.K.'s FTSE (-0.1%) outperforms thanks to strength in select financials and consumer names. STOXX Europe 600: -0.6%, Germany's DAX: -0.7%, U.K.'s FTSE 100: -0.1%, France's CAC 40: -0.7%, Italy's FTSE MIB: -0.9%, Spain's IBEX 35: -0.8%

• In economic data:

• France's August government budget deficit EUR187.9 bln (last deficit of EUR169.0 bln)

• Spain's September Unemployment Change 19,800 (expected -12,200; last 24,800)

• Switzerland's September CPI -0.1% m/m (expected 0.0%; last 0.2%); 1.7% yr/yr (expected 1.8%; last 1.6%)

• In news:

• The European Commission is expected to release a list of ten critical technologies that are vulnerable to data leaks.

• European Central Bank policymakers Simkus, Lane, and Valimaki spoke in favor of keeping rates at a restrictive level.

• Italy's Ministry of Industry expects domestic inflation to slow to 3.4% by the end of this year.

U.S. equity futures:

• S&P 500 Futures -23 @ 4,266

• DJIA Futures: -161 @ 33,273

• Nasdaq 100 Futures: -106 @ 14,731

Overseas:

• Europe: DAX -0.7%, FTSE -0.1%, CAC -0.7%

• Asia: Nikkei -1.6%, Hang Seng -2.7%, Shanghai Composite CLOSED

Commodities:

• Crude Oil -0.51 @ 88.31

• Nat Gas +0.022 @ 2.862

• Gold -5.00 @ 1842.20

• Silver -0.188 @ 21.233

• Copper -0.0280 @ 3.6135

Earnings/Guidance:

• Bristow Group (VTOL) says it expects 10% increase in operating revenues from mid point 2023 to mid point 2024; expects 25% increase in adjusted EBIDTA over the same time period

• Cipher Mining (CIFR) announces September 2023 operational update

• CME Group (CME) reports second-highest September and Q3 ADV on record

• McCormick (MKC) reports EPS in-line, revs in-line; raises FY23 EPS in-line, reaffirms FY23 revs guidance

• ODDITY Tech Ltd. (ODD) raises its Q3 outlook, reflecting robust performance from its IL MAKIAGE and SpoiledChild brands

• UMH Properties (UMH) provides YTD operating update; as of Q3, monthly rental revs up 9.7% compared to Jan 1; home revs up 15%

News:

• Rep. Matt Gaetz (R-FL) files motion to remove House Speaker Kevin McCarthy as punishment for working with Democrats to fund government. Vote will take place within days, according to the New York Times

• Cleveland Fed President Loretta Mester (non-voter) in interview says one more rate hike might be needed this year, according toBloomberg

• China Evergrande Group soars when trading resumed amid police investigation, according to the Wall Street Journal

• More people are returning to the office since September, but many office buildings are still half empty with record high vacancies, according to the Wall Street Journal

• WGA issues statement of support for SAG-AFTRA

• FBI released NICS background checks data; September 2023 Total NICS Background Checks were 2,104,185 -14.7% yr/yr

• Adeia Inc. (ADEA) files federal breach-of-contract lawsuit against Shaw Cablesystems and Shaw Satellite

• Adeia Inc. (ADEA): Samsung (SSNLF) enters into long-term agreement, renewing its license to Adeia's media IP portfolio for its mobile devices and related offerings

• Algoma Steel Group (ASTL) announces two-year extension of its existing iron ore purchase contract with United States Steel Corporation (X), with option to extend for a third year

• Allison Transmission (ALSN) signs memorandum of understanding with Grupa Grupa Zbrojeniowa to provide tracked vehicle transmission service and repair in Poland

• Alvotech (ALVO) enters into exclusive licensing agreement with Kashiv BioSciences for development and commercialization of a proposed biosimilar to Xolair

• AstraZeneca (AZN) settles Nexium liability litigations

• atai Life Sciences (ATAI) Announces Completion of Phase 1 Study of VLS-01 in Healthy Participants

• ALX Oncology (ALXO) reports interim Phase 2 ASPEN-06 clinical trial results of Evorpacept for the treatment of advanced HER2-Positive Gastric Cancer

• Boeing (BA) will soon set record 737 production goal in 2025, according to Reuters

• BridgeBio Pharma (BBIO) and National Resilience announced a strategic collaboration to manufacture and advance BBP-812

• Brookfield Infrastructure (BIP) announces automatic purchase plans

• Brown-Forman (BF.A) board approves share repurchase authorization of $400 million

• Castle Biosciences (CSTL) presents new data at ASTRO 2023 highlighting risk-stratification performance of DecisionDx-SCC in patients with cutaneous squamous cell carcinoma eligible for adjuvant radiation therapy

• China Yuchai (CYD) subsidiary Guangxi Yuchai Marine and Power Genset won a new contract to install Yuchai's ferroalloy off-gas power generation system at a production plant which specializes in silicon-manganese alloys production

• Delta Air Lines (DAL): A small number of Delta aircraft engines used fake parts, according to Bloomberg

• Enovix (ENVX) announces strategic realignment of Fab1 to improve operational efficiency and enhance technology development

• Ford (F) and General Motors (GM) to eliminate 500 factory jobs, according to the Wall Street Journal

• Ginkgo Bioworks (DNA) wholly-owned subsidiary Zymergen filed voluntary petitions for relief under Chapter 11

• HP Inc. (HPQ) 10% owner Warren Buffett sold another 5,125,638 shares worth more than $132 mln (8/28-10/2transaction dates)

• HP (HPQ) and Google (GOOG) to partner to make Chromebooks in India, according to Times of India

• HYZON Motors (HYZN) disclosed yesterday that it amended Intellectual Property Agreement pertaining to their rights in and to hydrogen fuel cell intellectual property

• Jabil (JBL) announces restructuring plan relating to sale of Mobility segment; includes headcount reductions and capacity realignment, expects $200 mln in cash expenses

• Krispy Kreme (DNUT) explores strategic alternatives for Insomnia Cookies

• LifeMD (LFMD) and Particle Health demonstrate the potential of using comprehensive electronic health record data to triage patients for GLP-1 Weight Management Therapy

• Meta (META) considers charging $14/month for Instagram without advertising, according to the Wall Street Journal

• Molina Healthcare (MOH) in 8K filing: Indiana is only state in its portfolio in which a Medicaid contract has been affected by the CMS administrative proceeding; not material to financials

• Nextracker (NXT) now has contracted for 10 GW per annum of local India manufacturing capacity

• Occidental (OXY) and ADNOC to commence preliminary engineering study of a Direct Air Capture facility in the UAE

• Ocean Biomedical (OCEA) entered into a Side Letter Agreement with Polar Multi-Strategy Master Fund amending certain terms of the assignment and novation agreement

• OneWater Marine (ONEW) entered into a strategic relationship with Bradford Marin

• PDS Biotechnology (PDSB) announces interim 24-month survival rate of 74% in immune checkpoint inhibitor nave head and neck cancer patients treated with PDS0101 in combination with KEYTRUDA

• Perpetua Resources (PPTA) disclosed Clean Water Act lawsuit was dismissed without prejudice

• Regeneron (REGN) and Intellia (NTLA) announce expanded research collaboration to develop CRISPR-based therapies for the treatment of neurological and muscular diseases

• Renalytix (RNLX) announces that Medicare prices kidneyintelX.dkd at $950

• Sanofi (SNY) announces agreement for potential first-in-class vaccine against extraintestinal pathogenic E. coli

• Summit Midstream Partners (SMLP) provides operational update; announces review of strategic alternatives

• Symbotic (SYM) announces retirement of CFO Tom Ernst and appointment of Carol Hibbard as successor

• Takeda (TAK) Provides Update on EXKIVITY (mobocertinib)

• Tenaya Therapeutics (TNYA) Publishes Preclinical Data in Circulation Highlighting the Clinical Potential of Cellular Reprogramming for Cardiac Regeneration

• TotalEnergies SE (TTE) and Borealis start up Baystar JV Polyethylene Unit

• Visa (V) announces new $100 mln generative AI ventures initiative

• WeWork (WE) elects to withhold interest payments in order to allow discussions with certain stakeholders in its capital structure to commence

M&A:

• Brookfield (BAM) aiming to acquire Banks Renewables for GBP 1 bln, according to Financial Times

• Commscope (COMM) divests Home Networks in exchange for a 25% stake in Vantiva SA

• GMS (GMS) provides an update on the continued execution of its growth strategy with the acquisition of AMW Construction Supply

• POINT Biopharma (PNT) to be acquired by Eli Lilly (LLY) for $12.50 per share

• Polymet Mining (PLM) filed yesterday management information circular to consider the US$2.11 per share Glencore (GLNCY) proposal

• Radiant Logistics (RLGT) acquires operations of Daleray Corp

• RPM Inc (RPM) acquires panelized wall systems fabrication business; Terms of the transaction were not disclosed

• Ryerson (RYI) acquires Norlen Incorporated; financial terms were not disclosed

• Sculptor Capital (SCU): Boaz Weinstein raises bid for the company as Rithm (RITM) contemplates higher offer, according to Bloomberg

• Shift4 Payments (FOUR) reached an agreement with SpotOn Technologies to acquire assets related to SpotOn's sports and entertainment division formerly known as Appetize for approximately $100 million in an all-cash transaction

Syndicate:

• Amprius Technologies (AMPX) entered into $100 mln At Market Issuance Sales Agreement pursuant to the Company's shelf registration statement on Form S-3

• Biohaven (BHVN) files mixed shelf securities offering; prices offering of 10,227,273 of common shares at $22.00 per share

• Third Harmonic Bio (THRD) files $400 mln mixed shelf securities offering

• Turning Point Brands (TPB) files $500 mln mixed shelf securities offering

• Westrock Coffee Company (WEST) files $500 mln mixed shelf securities offering

IPOs:

• Priced to Trade:

• No IPOs expected.

Gapping Up/Down

• Gapping up:

• ODD +13.2%, ATAI +7.3%, SCU +6.3%, HYZN+3.3%, AOUT +3.2%, LFMD +3%, SAFE+1.9%, ASTL +1.4%, ADEA +1.3%, UMH+0.8%, MDB +0.6%

• Gapping down:

• ALXO -13.3%, BHVN -5.9%, CIFR -3.9%, AURA -3.1%, WEST -2%, WE -1.7%, TAK-1.5%, TPB -1.2%, RLGT -0.9%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

• AllianceBernstein (AB) upgraded to Buy from Neutral at Goldman; tgt lowered to $36.75

• Fiverr (FVRR) upgraded to Buy from Neutral at ROTH MKM; tgt $33

• Reynolds Consumer Products (REYN) upgraded to Neutral from Sell at Goldman; tgt raised to $30

• Warby Parker (WRBY) upgraded to Outperform from In-line at Evercore ISI; tgt $20

• Downgrades:

• Ingevity (NGVT) downgraded to Hold from Buy at Loop Capital; tgt lowered to $53

• Others:

• Applied Digital Corporation (APLD) initiated with a Buy at ROTH MKM; tgt $14

• WK Kellogg Co (KLG) initiated with a Sell at Goldman; tgt $11

Econ Data:

• 10:00 ET: JOLTS - Job Openings for Aug (Briefing.comConsensus NA; Prior 8.827M)

Earnings:

• Tuesday (Oct 3)

• Morning: MKC

• Afternoon:  CALM

• Wednesday (Oct 4)

• Morning:  ANGO HELE RPM TLRY

• Afternoon:  ACCD RGP

• Thursday (Oct 5)

• Morning: CAG STZ LW

• Afternoon:  LEVI

Asia & Europe detail:

Asia: Nikkei -1.6%, Hang Seng -2.7%, Shanghai Composite CLOSED

Equity indices in the Asia-Pacific region ended Tuesday on a lower note while markets in China and South Korea remained closed for holidays. Elsewhere, Japan's Nikkei fell to its lowest level since early June while Hong Kong's Hang Seng was pressured to a level not seen since late November. Property stocks remained weak in Hong Kong even though Evergrande rallied after its trading halt was lifted amid news that the company's founder and chairman is in police custody. The Reserve Bank of Australia left its cash rate at 4.10%, as expected.

• In economic data:

• India's September Manufacturing PMI 57.5 (expected 58.1; last 58.6)

• Australia's August Building Approvals 7.0% m/m (expected 2.5%; last -7.4%); -6.7% yr/yr (expected -6.4%; last -7.0%). August Home Loans 2.6% m/m (expected 0.0%; last -1.9%) and Private House Approvals 5.8% m/m (last 0.4%). September Commodity Prices -22.0% yr/yr (last -22.9%)

• New Zealand's Q3 NZIER Business Confidence -52% (last -63%) and Q3 QSBO Capacity Utilization 87.3% (last 81.7%)

---Equity Markets---

• Japan's Nikkei: -1.6%

• Hong Kong's Hang Seng: -2.7%

• China's Shanghai Composite: CLOSED

• India's Sensex: -0.5%

• South Korea's Kospi: CLOSED

• Australia's ASX All Ordinaries: -1.3%

---FX---

• USD/JPY: UNCH at 149.87

• USD/CNH: +0.1% to 7.3232

• USD/INR: UNCH at 83.21

Europe: DAX -0.7%, FTSE -0.1%, CAC -0.7%

Major European indices trade in the red while the U.K.'s FTSE (-0.1%) outperforms thanks to strength in select financials and consumer names. The European Commission is expected to release a list of ten critical technologies that are vulnerable to data leaks. European Central Bank policymakers Simkus, Lane, and Valimaki spoke in favor of keeping rates at a restrictive level. Italy's Ministry of Industry expects domestic inflation to slow to 3.4% by the end of this year.

• In economic data:

• France's August government budget deficit EUR187.9 bln (last deficit of EUR169.0 bln)

• Spain's September Unemployment Change 19,800 (expected -12,200; last 24,800)

• Switzerland's September CPI -0.1% m/m (expected 0.0%; last 0.2%); 1.7% yr/yr (expected 1.8%; last 1.6%)

---Equity Markets---

• STOXX Europe 600: -0.6%

• Germany's DAX: -0.7%

• U.K.'s FTSE 100: -0.1%

• France's CAC 40: -0.7%

• Italy's FTSE MIB: -0.9%

• Spain's IBEX 35: -0.8%

---FX---

• EUR/USD: -0.1% to 1.0474

• GBP/USD: -0.2% to 1.2055

• USD/CHF: +0.6% to 0.9232